Retirees bilked of $30 million in scam shut down by state

State seizes firm’s fundsCraigslist used to lure retirees, investors in scam, officials say

R.G. RATCLIFFE, Austin Bureau

Published
6:30 am CST, Thursday, February 26, 2009

AUSTIN — Using state licensed insurance agencies and ads on Craigslist, a Houston company lured almost 300 older Texans into investing about $30 million in what the state is calling a fraud scheme.

On Thursday, Travis County state District Judge Scott H. Jenkins ordered a temporary injunction against National Life Settlements of Houston and placed the company under permanent receivership of Houston lawyer Janet Mortenson. The state has seized about $21 million in company bank accounts.

Mortenson said the investors, many retired, were from across Texas, particularly Houston, Austin and the Lower Rio Grande Valley. One investor was 80 years old.

Many of those who invested still may not know they were part of an alleged fraud scheme because the life insurance securities they thought they were buying did not have an immediate payout. The investments were made between November 2006 and Feb. 13, when the state first raided the National Life offices in Houston.

Mortenson said she will be sending letters to investors notifying them of the fraud and how they can recover their money.

Most of the money transferred to National Life came from banks, 401(k) rollovers and $2.6 million in transfers from the state comptroller’s office directed by retired state employees and teachers.

About $4 million of the investors’ money was used by National Life officials Howard Judah of Houston and Gregory Jablonski of Colorado to purchase homes, a Mercedes-Benz and for personal expenses, including $4 for a meal at Jack in the Box, Texas securities officials allege.

“It’s risky (investing) even if they did what they said they were going to do,” Mortenson told Jenkins. “But they didn’t do that. They were using the money for their own personal lifestyle.”

Prior convictions

Mortenson said Judah and Jablonski also did not reveal to investors that Judah had three convictions for wire fraud, money laundering and criminal contempt of court.

John LaGrappe, a Houston lawyer representing Judah and Jablonski, said the men mishandled their business but said there was no attempt to defraud investors. He said Judah is about 80 years old and Jablonski is 62.

“I don’t think in any way are these guys cons. It was a situation of them not understanding things,” LaGrappe said.

LaGrappe said the men purchased about $3 million in life insurance policies and were in the process of 11 other purchases. They are cooperating with the state, he said.

LaGrappe declined to discuss how the men may have spent some of the investors’ money, but he said the biggest expense was the fact the insurance brokers selling the National Life plans were paid up-front commissions.

The Texas State Securities Board launched an investigation into National Life Settlements last year and is pursuing civil and criminal investigations, she said.

The company and its agents told investors their money would be used to purchase life insurance policies that would pay out on the death of the insured. Only a small part of the money was used to invest in three Canadian trusts, Mortenson said, but she did not know if any of the money was used to purchase life insurance policies.